Whether you have ever driven for or with a rideshare company, you are maybe aware of surge pricing. Surge pricing is a type of dynamic pricing in which the cost of a ride goes up based on demand. Companies like lyft, Uber and other rideshare services charge surge prices in places where there are more ride requests than driver supply, especially taking charge of supply-and-demand. The price of a ride goes up to quicken wait times for customers that really need one while others in less of a hurry may be willing to wait — thus moderating the overall ride demand.
Surge pricing happens in places that have become busy for one reason or another. Some cities have dramatic rush hours on a daily basis that add up to surge pricing. Commuters may even prefer an Uber ride in the carpool lane over increasing stress to their own car during heavy traffic situations — even if it costs a bit more. Surge prices can equally pop up from weather conditions, holidays, and special events like sports games, concerts, and festivals. More people prefer to rideshare during these times to avoid parking hassles or engage in festivities without having to worry about being able to drive.
Though it may be an inconvenience to the riders, surge pricing works to the advantage of drivers. It incentivizes them to give more rides in areas that require it most and meet high demand. Companies like Uber do not increase their commission on Uber driver’s ride pay, so it lets them to make more money. In fact, some rideshare apps have an alert, available to both drivers and riders, that informs users when surge prices occurs in a specific area.
How Does Surge Pricing Works
Surge pricing is controlled by the supply of drivers and the demand of riders. Rideshare apps typically inform the user when demand increases and adds to surge prices by displaying a map showing “hot” areas. In Uber, for example, areas experiencing surge prices indicates a red and display a surge multiplier by which prices are higher. To break down what Uber’s multiplier means:
- A number next to “x” will pop up, such as 1.5x, to show how much your base fare will be multiplied by.
- This multiplier would be joined to the set base, distance, and time fees.
- A normal price of $5 would be multiplied by 1.5.
- The surge charge would then get to $7.5.
Surge rates are often updated constantly, as companies use real-time supply-and-demand data to know prices. Costs are based on rider location, not the drivers, to further incentivize drivers to head toward areas that need it the most.
Ways to Avoid Surge Pricing
Paying extra money for a ride may not sound all that appealing, but below are 7 tips to avoid surge prices:
- Pay attention to the times of day where prices sharply increase and try to avoid ridesharing at those times.
- Keep track of busy areas and, where possible, move on foot or by another means of transportation to a less-affected area.
- Make use of a public transportation where it’s available in your area, or hitch a ride from a friend.
- Schedule a ride in advance if you cannot move your schedule around to avoid surge pricing. Both Uber and Lyft include this feature in some locations, and the price may end up lower than what you expected.
- Try switching between apps. Uber may be surging in a particular location while Lyft or other rideshare services are not.
- Try a different Uber vehicle. Surge prices may not apply to all the cars Uber offers. These rides may be more expensive at normal hours but might actually beat an area’s surge prices.
- Wait it the surge period. When you’re not in a hurry to go somewhere else, you can wait until surge prices disappear in your area.